The reason behind the new Rs 200 note

On Thursday, the Reserve Bank of India announced that it would issue Rs.200 notes on Friday. Post the announcement, RBI said that the introduction of a new currency denomination and design was done keeping in consideration various factors like ease of transactions for the common man, inflation, replacement of soiled bank notes and the need to combat counterfeiting.

Group chief economic advisor of State Bank of India, Soumya Kanti Ghosh calls the Rs 200 note, the ‘missing middle’ and pointed out that there was no note between the denominations of Rs.500 and Rs.2000, hence the Rs.200 note would be useful and will ease smaller operational difficulties. It will also facilitate transactions and getting a change would become easier. Most importantly, hoarding of the smaller notes is difficult and that too would be checked.

As per the estimates of SBI, in the pre demonetization period, 87% of the currency in circulation consisted of high denomination notes. As a masterstroke against black money, high value currency in circulation stands at about 70% as per India’s largest public sector lender. After the demonetization move, new currency notes of Rs.500 and Rs.2000 denominations were introduced into the system in order to ease the severe liquidity crunch that had hit the country. Post demonetization, five new currency notes had been announced, which are Rs.2000, Rs.500, Rs.200, Rs.50 and Re.1.  While Rs 500, Rs 50 and Re 1 are redesigned notes, Rs 2,000 and Rs 200 are both debutantes in the history of Indian currency.

The new Rs.200 note will be issued from select RBI office and some Banks from Friday. It will not be available at ATMs right away as the machines would need recalibration before the new currency is disbursed. Since the length of Rs.200 notes is different from the existing currency of Rs.100, Rs.500 and Rs.2000, cassette calibration is required to be done. Hence ATM manufacturers will have to do a complete testing of the new 200 denomination currency and provide the parameters which will have to be configured at the ATM by an engineer. At the ATM switch level, a new configuration will be needed which will ensure ease of use and availability of the notes.

After the strong move of demonetization, the Narendra Modi Government has been constantly working to keep a check on the movement of currency in the economy and has introduced new notes of different currencies so as to allow ease of exchange and availability of change. With the use of Rs.2000 notes, the biggest problem was the change and the introduction of Rs.200 notes will ensure that this problem is tackled. The notes will soon be available across different branches of the Banks.